Intel Corporation
INTC
received a letter from Third Point LLC urging management to explore strategic alternatives to improve performance. Third point LLC is an activist investor fund founded by Daniel S. Loeb.
Intel’s shares jumped 4.9% following the news and closed the trading session at $49.39 on Dec 29.
In the letter, as obtained by ValueWalk
, Third Point underscored that Intel has lost its market share in microprocessor manufacturing to Asian peers like Taiwan Semiconductor Manufacturing and Samsung. The letter further stated that Intel’s delay in the launch of 7 nanometer (nm) chips will position the company way behind its Asian peers in the first five years of this decade.
Also, the company is losing ground to
Advanced Micros Devices
AMD
in the lucrative core PC and data center CPU markets while
NVIDIA
NVDA
is strengthening its position in the GPU used in AI applications’ domain.
Intel Corporation Price and Consensus
Intel Corporation price-consensus-chart
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Intel Corporation Quote
Loeb also pointed out the fallacy of providing extravagant renumeration to the board members amid a deteriorating company performance.
Third Point’s Suggested Remedial Measures
Third Point urged Intel to appoint an investment advisor and consider the idea of continuing as an integrated device manufacturer. The hedge fund has also advised it to offload “certain failed acquisitions”. However, no names have been specified.
Further, Third Point urgently wants Intel to address its human capital management troubles. The company has lost talented staff, and the existing employees are demoralized due to the current situation, highlighted the hedge fund in the letter.
Loeb pointed out the current trend in the semiconductor space wherein tech giants like Apple and
Microsoft
MSFT
are
mulling
on designing chips in-house and leverage manufacturing capacity of East Asia-based manufacturers.
Intel should find ways to serve its competitors as clients by offering them innovative solutions, stated Loeb.
Citing sources familiar with the matter, Reuters
reported
that Third Point LLC has garnered a $1 billion stake in Intel.
Intel responded through a press release wherein the chipmaker stated that it would welcome input from all investors that unlocks shareholder value and is looking forward to engaging in a constructive dialogue with Third Point LLC.
Intel’s Woes
Intel is witnessing increasing competition in the server, storage and networking markets.
Further, Intel’s launch of chips based on 7nm process has been delayed as it detected a major defect mode in 7 nm process, which caused yield degradation.
On the contrary, Advanced Micro Devices is utilizing Taiwan Semiconductor Manufacturing’s 7 nm process technology, which will expedite delivery of advanced 7 nm chips to market.
Further, NVIDIA’s buyout of ARM Holdings is likely to provide the acquirer a full stack CPU-GPU offering, which is concerning for Intel.
Shares of Intel, which carries a Zacks Rank #4 (Sell), have declined 17.5% against the
industry
’s growth of 33.2% on a year-to-date basis.
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